Do you know how to help clients decide the best age for starting Social Security benefits, on a pure "time value of money" (net present value) basis? For workers who do not earn more than the earnings limit through the year in which they turn age 66 (currently $14,160), there are two inputs to consider: 1) the average annual Social Security Cost of Living Adjustment (COLA) in the future; and 2) the opportunity cost or discount rate.
Assuming average COLA is 3.5% and opportunity cost is 5.0%:
- A worker who delays the start of benefits from age 62 to 66 will receive more cumulative net present value at a "crossover age" of 79.
- A worker who delays the start of benefits from age 66 to 70 will receive more cumulative net present value at a "crossover age" of 84.
The earnings limit does not apply after the worker's 66th birthday.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
